Economics of the Madhouse

by Adnan Al-Daini / September 26th, 2011

I do not know about you but I am finding myself baffled, irritated and confused by the World Bank, the European Central Bank (ECB), the IMF and a few other acronyms that seem to dominate the news. I did not vote for any of these organisations, so why do they have such an influence on my life, the lives of the rest of the British public and the lives of tens of millions across the globe. They seem to be running the world. The news is dominated by the “market”. On our television screens we see people staring at screens and pressing buttons. With a few strokes on a keyboard these people hold the lives of millions at their mercy. How did it come to this? What sort of a system have we created that gives so much power to these people? How is it that these people, who are entrusted with the money made by working people, end up gobbling up the money for which people have laboured so hard? How were they ever allowed to have such a stranglehold on the lives of millions?

Where were the people we elected to look after us when such a distorted, corrupted form of capitalism was being developed? Were they so incompetent, or have they become part of an oligarchy that enriches them as well as the gamblers of the market? Money exists to make it easier for the real wealth creators to serve society: those who labour by brain and brawn to enhance and improve our existence. How is it that such a basically simple operation of distributing our money to wealth creators became so complex? Of course we know why; this complexity is the method through which the public are deliberately hoodwinked for the “moneymen” to siphon off the money for themselves.

The status afforded by astronomical salaries for those on the top of the money business pyramid saw mathematics and science graduate highfliers join this money industry. They employed their talent to produce ever more complex packages in which were bundled toxic “IOUs” to trade in the market, making money every time a transaction was made, until finally the one left holding these worthless bits of paper got stung. The government then, using our taxes, came to the rescue by pumping billions of pounds into these financial institutions. In the meantime, lives were ruined; people were becoming homeless and jobless. Pensions for which people had saved all their lives were eroded, consigning millions of pensioners to lives of poverty when they were most vulnerable.

What of the politicians; where is the fresh thinking to deal with such a calamitous, unjust and unfair system? I see very little difference between the political parties; the differences seem to boil down to the extent of the cuts. How can it be right that the solution to this crisis involves the collective punishment of almost the entire population, apart that is, from the “moneymen” who caused it in the first place? The lack of imagination to think outside the “straightjacket” placed on politicians by the “moneymen” is staggering.

The Guardian this morning (September 23) is reporting that the IMF Chief, Christine Lagarde, is urging European governments to bail out the banks once again. Why can’t governments pump money elsewhere? Is there some natural law that compels governments to channel money through the banks? The first bailout has failed to get the economy moving, so why should more of the same medicine work? What about bank reforms? Even the modest reform of ring fencing normal banking from its gambling arm has been pushed back by intensive lobbying to 2019. The UK government even opposes the small tax on financial transactions (Robin Hood tax) that France and Germany are advocating.

Something has gone very seriously wrong with this model of capitalism; fresh thinking and serious reforms are urgently needed. The distribution of wealth has been so unfair and distorted with vast amounts horded by the few at the top of society. The Daily Mail attributes a substantial part of the widening wealth gap to earnings in the financial sector:

Some 60 per cent of the increase in the gap between the richest and poorest between 1998 and 2008 is down to soaring financial services earnings, according to a report from the London School of Economics.

Those whose job it is to distribute the cash earned by hardworking ordinary people to fuel society’s engine have run away with the loot and the system has seized up. The maddening thing is that politicians are so awestruck and mesmerised by the “moneymen”, that they keep pumping more money into their coffers in the hope that something will trickle down to make the machine work.

Politicians and opinion-formers, please stop listening to the “moneymen”. Go back to first principles and start using some common sense.

Adnan Al-Daini (PhD, Birmingham University, UK) is a retired University Engineering lecturer. He is a British citizen born in Iraq. He writes regularly on issues of social justice and the Middle East. Read other articles by Adnan.